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9609 · 3.1.7

Customer relationship marketing (CRM) — practice questions

Practice and worked examples for 9609 Customer relationship marketing (CRM). Short previews only — attempt the full question in MarkScheme against the official scheme.

Worked example 1

A supermarket introduces a loyalty app tracking purchases and offering personalised coupons. Analyse two benefits and one risk.

Show solution outline

Benefit 1 — Retention: Personalised coupons on frequently bought items increase repeat visits vs rivals.

Benefit 2 — Data: Purchase data reveals basket trends for own-label development and store layout — informs marketing and operations.

Risk — Privacy: Customers may distrust data collection; breach or misuse damages brand; must comply with data protection laws and offer opt-out.

Worked example 2

A subscription-based streaming service, 'StreamFlix', uses its CRM data to analyse two key customer segments. Calculate the simple Customer Lifetime Value (CLV) for a customer in each segment and briefly explain the strategic implication.

Data:

  • Segment A (Standard Plan):
    • Monthly fee: $12
    • Average customer lifespan: 20 months
    • Monthly cost to serve (support, server usage): $3
  • Segment B (Premium Plan):
    • Monthly fee: $20
    • Average customer lifespan: 36 months
    • Monthly cost to serve (support, server usage): $4
Show solution outline

Formula: A simple Customer Lifetime Value (CLV) is calculated as: CLV=(Average Revenue per Customer−Average Cost per Customer)×Average Customer LifespanCLV = (\text{Average Revenue per Customer} - \text{Average Cost per Customer}) \times \text{Average Customer Lifespan} This can be simplified to: CLV=Contribution per Customer×LifespanCLV = \text{Contribution per Customer} \times \text{Lifespan}

Step 1: Calculate the monthly contribution for a Segment A customer. Contribution = Monthly Fee - Monthly Cost Contribution (A) = $12 - $3 = $9 per month

Step 2: Calculate the CLV for a Segment A customer. CLV (A) = Contribution per month × Lifespan in months CLV (A) = $9 × 20 = $180

Step 3: Calculate the monthly contribution for a Segment B customer. Contribution = Monthly Fee - Monthly Cost Contribution (B) = $20 - $4 = $16 per month

Step 4: Calculate the CLV for a Segment B customer. CLV (B) = Contribution per month × Lifespan in months CLV (B) = $16 × 36 = $576

Final Answer and Strategic Implication:

  • CLV for Segment A: $180
  • CLV for Segment B: $576

Explanation: The CLV of a Premium Plan customer ($576) is more than three times that of a Standard Plan customer ($180). This quantitative analysis shows that StreamFlix should prioritise its CRM efforts on retaining Segment B customers. Strategies could include offering exclusive content, better streaming quality, or personalised loyalty rewards to reduce churn in this highly profitable segment. It might also inform a strategy to encourage Segment A customers to upgrade to the Premium Plan.

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